Can you guess one of the most popular reasons to buy life insurance? Among our clients, “becoming a parent” ranks right up near the top.
It makes sense: Parents are the center of their children’s worlds, both emotionally and financially. If one parent died, could the surviving parent carry the whole financial burden alone?
Or what about single parents? Or what if you and your significant other passed away in the same accident. What then?
In this post, I’ll discuss the best life insurance plans for parents.
Then, we’ll discuss the other end of the spectrum: Adult children buying life insurance on their elderly parents.
Best Life Insurance for Parents
Haven Life: Best Term Policies
For many parents with young children, term life insurance works best. Term life policies offer simple and large coverage amounts at affordable prices.
Haven Life is an online insurance agency that sells only term life policies from MassMutual, an A++ rated insurer.
Haven Life helped pioneer online insurance shopping. Younger shoppers can get a large medically underwritten policy without the health exam which is a huge time saver.
Even if you do need a medical exam to finalize coverage, Haven Life can still get you covered quickly with up to $3 million in affordable coverage.
Haven Life Pros:
- Fast access to simple term coverage
- Simple, sleek website and app to buy/manage policy
- MassMutual is A++ (top-rated) by A.M. Best
Haven Life Cons:
- Caters to younger, healthier shoppers
- Limited policy options (level term only)
Northwestern Mutual: Best Permanent Coverage
I like Northwestern Mutual for permanent coverage because this insurer’s agents treat insurance like part of your broader financial plan.
Northwestern offers whole life and universal life policies.
Unlike term life insurance, permanent life insurance plans never expire, and they build their own cash value so your policy can become an asset later in your life.
You’d pay more for this kind of coverage, and it won’t offer the huge coverage amounts term offers.
But some parents are planning for their entire financial lives like permanent life insurance.
Whole life builds cash value that grows like money in a savings account.
Universal life insurance’s cash value is more flexible.
You could invest it, use it to lower your premiums later in life or use it to increase your policy’s death benefit.
Northwestern Mutual Pros:
- A++ rated coverage
- Knowledgeable agents / financial planners
- Whole life policyholders can earn dividends
Northwestern Mutual Cons:
- Available only from licensed agents
- Policies require a medical exam
State Farm: Best All-Around
You already know about State Farm unless you’ve lived your whole life in a cave with no TV or internet connection.
This insurer writes home, auto, and life insurance policies for people across the country.
I list them here because they have so many plans for so many different stages of life.
Plus, you’d have the option of saving on premiums by bundling your coverage with your auto or home policies.
No, State Farm isn’t a life insurance specialist, but it’s still one of the biggest and most accessible underwriters you’ll find.
Chances are you live close to a State Farm agency.
A.M. Best has upgraded State Farm’s coverage to A++, the same financial strength rating you’d get from Northwestern Mutual, MassMutual, and other life insurance specialists.
State Farm Pros:
- A++ rated coverage
- An expansive network of local insurance agents
- Solid online tools
- Wide variety of life insurance plans
State Farm Cons:
- Customer service depends on a local agent
- Variety can complicate shopping for simple needs
Transamerica: Best for Affordable Life Insurance for Smokers
A life insurance quote is unique to each individual shopper. This makes comparing prices complicated and often misleading for novice shoppers.
But it’s easy enough to notice trends, especially when you’ve worked with multiple life insurance companies for as long as I have.
Transamerica’s rates tend to be competitive across all its products, which range from simple term coverage to more complex whole and universal policies.
There’s no guarantee this will be the case for you, but I’ve seen it happen with many of my clients over the past few years, especially clients who are younger and in pretty good health.
This is even true for smokers, although tobacco users will always pay more compared to non-tobacco shoppers.
When you’re a parent with a big mortgage and ever-increasing expenses for the foreseeable future, finding a way to save a little money each month is worth getting that extra life insurance quote.
Transamerica Pros:
- Known for competitive rates
- Variety of policy options
- A+ rated coverage from A.M. Best
Transamerica Cons:
- Shoppers must work with licensed agents
- Online quotes not available
AIG: Best for Grandparents Raising Grandkids
Older shoppers pay more for new individual life insurance policies. That’s the way the industry works.
So if you’ve waited until later in life to start a family — or if you’re a grandparent who is raising grandchildren — you’ll have a harder time finding coverage.
AIG can probably help. This insurer specializes in term and universal life policies for older shoppers. In fact, you can get a new term life insurance policy even if you’re 79 years old.
Granted, you won’t get the same access to large death benefits and low premiums like a 30- or 40-something, but at least you’ll have access to quality coverage — A rated by A.M. Best.
One word of caution: If you’re shopping online and come across AIG Direct, know that this product features only guaranteed issue policies. These policies are open to almost anyone but they cost a lot more and offer only $25,000 in coverage and require a two-year wait for full coverage. Unless this is what you’re looking for, you’ll need to work with an agent in-person.
AIG Pros:
- Term and universal policies available up to age 80
- You could extend part of your policy to cover a child up to age 25
- Lots of policy options and riders
AIG Cons:
- Not available online (except guaranteed issue)
- Customer service ratings from J.D. Power are lowest on this list
Nationwide: Best for Covering Children, Too
Like State Farm, Nationwide is a well-known full-service insurance provider with agents across the country.
But unlike any other life insurance provider on this list, Nationwide excels with its child term rider.
Rider is insurance-speak for an optional add-on.
In this case, the child term rider lets you add up to $25,000 in coverage on multiple children in your family.
Nationwide isn’t unique by offering this rider, but its limit is higher than most other insurer’s.
Plus, Nationwide lets you add it to any policy, not just whole life insurance like some providers.
Nationwide Pros:
- A+ rated coverage from A.M. Best
- Available in most towns across the country
- Strong customer service reviews from J.D. Power
- Lots of other riders along with child term
- Ability to bundle and save if you have auto or home coverage
Nationwide Cons:
- Online quotes not available
- Available from local captive agents
Methodology: How I Chose These Best Insurers for Parents
Before we go on to discuss what kind of coverage to buy for you and your family, I’d like to share why I chose the six providers above.
First, they all excel in their niche areas which serve families well. But that’s not all. They also rate well with:
- A.M. Best: A.M. Best is the leading credit rating agency for insurance companies. Companies with A, A+, or A++ ratings (like all six on my list) are well run and should be around for decades to come. This isn’t a guarantee, but it’s about as close as you can get — especially the A++ rated providers.
- J.D. Power Insurance Study: Each year this study rates insurers on their customer service chops. All of the companies on my list at least made J.D. Power’s list of strong customer satisfaction. A few — State Farm, Nationwide, and Northwestern Mutual — claim spots near the top of J.D. Power’s list year after year. (Haven Life falls under MassMutual’s umbrella if you’re looking up these numbers yourself.)
- NAIC Complaint Index: The National Association of Insurance Commissioners tracks complaints made to state authorities each year. With the exception of AIG, each of the life insurance companies on my list receive fewer than the median number of complaints lodged to state insurance regulators.
I considered only insurers that can combine these credentials — while also designing products to help people protect their loved ones financially.
Now, let’s look closer at which type of life insurance you should be considering for yourself and your family.
A Parent’s Guide to Buying Life Insurance Policies
You should have enough life insurance coverage to help your family survive, or even thrive, financially if you died.
For many parents of young children, this means buying a large term life insurance policy — one big enough to address everything from childcare to college tuition.
For others, a final expense life insurance plan will suffice. This type of whole life policy has an amount of coverage designed to pay funeral expenses, small debts, and other end-of-life costs.
Still, a third category of shoppers wants to purchase life insurance as an investment with tax-deferred savings — a universal life insurance policy, for example.
Which of these types of life insurance do you need? These questions can help you decide.
How much do my family members depend on my salary?
If the financial needs of your family — present and future — fall squarely on your income from work, you’ll need a lot of life insurance coverage.
A term life insurance policy could provide millions of dollars in coverage to meet your financial obligations for years to come if the worst happens.
Term life is also the most affordable type of insurance because you’re paying only for the coverage and not for an investment component.
Plus, your coverage won’t last your entire life. It’ll expire when your term ends.
By then, your financial situation could be completely different and you’d need a different type of coverage.
Now, if you have investments or other assets whose proceeds provide for your family’s ongoing financial needs, you probably need a smaller type of policy.
You may want a permanent life insurance product that can become an asset itself over time.
How much would it cost to do what I do?
Even parents who aren’t breadwinners often need life insurance coverage.
Think about how much it would cost to pay for the services you provide for your family at no charge?
For a stay-at-home parent, this means childcare, transportation, housework, cooking, tutoring, coaching. The list goes on and on.
If the surviving parent had to hire someone to do all these jobs, your current budget would look a lot different.
A life insurance payout could help take care of these needs.
What about my debt and future costs?
Most families spend a chunk of their income serving debt.
Credit card debt, private student loans, your mortgage, car payments or lease agreements — all these financial obligations could survive you to burden your surviving spouse and children after you’re gone.
Whatever kind of life insurance you buy, make sure you have a plan for addressing these end-of-life costs.
Then, think about all the plans for the future you’ve made. Chances are you’re planning to send the kids to college.
Maybe you’re saving for a vacation home. Life insurance proceeds could provide a tax-free payout to keep these dreams on track even if you’re not around to see them through.
And then there are future unexpected costs like long-term care, medical bills, and such.
The best life insurance options consider these potential financial stressors as well as your plans.
Buyer’s Guide: How Much Will My Life Insurance Policy Cost?
This is the big question. There’s no certain, absolute answer, though. More than most products, life insurance is tailored to, well, your life.
How much you’ll pay depends a lot on how your life looks to the insurance company.
Expect higher premiums if:
- You have health issues: Chronic health conditions like diabetes, heart disease, or a history of cancer can drive up insurance premiums. You’ll need to work with an independent life insurance agency like ours to find the best life insurance options for you.
- You’re older: Life insurance underwriting puts a lot of emphasis on age. Older shoppers pay more for new coverage because — to put it bluntly — they’re more likely to die sooner.
- You have dangerous hobbies and habits: Smoking tobacco, vaping, smoking marijuana — these sorts of habits require higher premiums. Once again, an independent life insurance agency can likely help you find the financial protection you’re looking for.
- You work a dangerous job: Roofers and utility workers can expect to pay more for coverage because their jobs put them at greater risk of accidental death.
Policy and underwriting types affect costs, too:
- No exam life insurance: The idea of skipping the medical exam sounds great, but many times this leads to higher premiums — especially if you’re young and healthy and could access the best rates out there with a medical exam.
- Term policy vs. Permanent policy: Term often costs a fraction of the cost of a permanent policy such as whole life or universal life. That’s because the coverage is only temporary, and if you outlive the term — which you hopefully will do — you’ll no longer have the coverage.
- Amount of Coverage: It shouldn’t be a surprise that more insurance costs more money. Buy only the coverage you need to avoid inflating premiums unnecessarily.
Where should I buy coverage?
We’d be glad to help you find the coverage you need. But if you need a simple term life insurance policy you could find one online.
Just be sure to shop around between at least three providers to make sure you’re getting the best deal.
More complex life insurance like universal life and whole life often requires working with an agent in person.
If you have special underwriting challenges such as health issues, leave us a comment below and we’d be glad to help.
As an independent agency, we work with dozens of carriers and can connect you with the right insurer for your needs.
Should You Buy a Life Insurance Policy on My Parents?
Now for a completely different topic that’s related to family life insurance: Buying coverage on your elderly parents.
Yes, you can buy life insurance on your parents. You can pay the premiums and file a claim as the beneficiary when the time comes.
But you’ll need to show insurable interest. This means you’ll have to prove there’s a reason you’re buying the coverage.
Adult children do this kind of thing all the time. We’d be glad to help you make this happen.
Often, elderly parents need a guaranteed issue policy that requires no medical exam.
This kind of coverage isn’t a bargain, but it could provide enough money for funeral expenses or to buy some time while the family dissolves the estate.
This kind of coverage — Mutual of Omaha is a good place to start — usually requires a two-year waiting period before the coverage goes fully into effect.
But it’s also possible to find simplified issue insurance that doesn’t require the waiting period and costs less.
Life Insurance for Parents Can Offer Peace of Mind
Your death would be devastation beyond description for your children and surviving partner. No amount of money could change that.
But your life insurance death benefit could offer financial protection as your loved ones rebuild a new life.
It could pay off debt, provide living expenses, and a financial plan going forward.
If you do much insurance shopping you’ll read a lot about “peace of mind.” That really is a good way of putting it.
When you have a life insurance policy in force, you’ll know you’ve done what you can to provide for just in case.
